opinion
Written by Danielle Elmore for The Policy Insider
Last week, the Federal Reserve Bank of New York revealed new insights into US household debt. Their findings reveal a potentially bleak future for members of Generation Z, who have dug themselves a deep financial hole.
Over the last three months of 2023, household debt rose by $212 billion, pushing the country's total household debt to a historic high of $17.5 trillion. This trend becomes even more alarming when combined with the contraction of personal savings in recent years.
Although these numbers are alarming, the most significant problems are experienced by the 18-29 age group, which is primarily made up of members of Generation Z. Although they have the lowest levels of debt compared to other generations, this group also has the highest The delinquency rate differs significantly – by 2.27% compared to 1.53% for the age group 30-39. Likewise, total Gen Z debt has risen by 12.6% in just the past six months, while total household debt has risen by just 2.6%.
Throughout the entire report, the most troubling trend for Gen Z comes in the form of high-interest credit card debt. People between the ages of 18 and 29 account for 9% of their $1.27 trillion in debt, and the default rate is nearly 10%. Such alarming numbers show a bleak outlook for the financial future of Generation Z, as they appear to be focused on their short-term happiness rather than long-term success.
Recent opinion polls confirm these results. Intuit's Prosperity Index study found that instead of cutting expenses, 73% of Gen Z would rather live in the moment. This is in line with the results of a separate survey conducted by Bank of America, which revealed that more than half of Generation Z view the high cost of living and persistent inflation as a barrier to their financial success. From this perspective, it makes sense that this generation places little value on saving. Undeterred by the true power of compound interest, this generation embraces a spending sentiment that prioritizes experimentation over financial security.
Aside from a decline in their personal savings rate in recent years, Generation Z also appears to be less interested in retiring early — if at all. This can be seen in their low 401(k) account balances, which average less than $2,000, and similarly low contribution rates, even after employer contributions. While their financial decisions indicate a lack of concern for their well-being decades from now, they also seem unaware of how their short-term mindset can limit opportunities later in life.
This comes as Generation Z is known for their short attention span, a trend often attributed to the endless stream of content and information available at the touch of a button. In fact, a study conducted by Microsoft in 2015 found that the average human attention span dropped from 12 seconds in 2000 to just eight seconds in 2013. This alarming decline should come as no surprise given the culture surrounding Generation Z, where software has evolved Thirty-minute TV videos are converted into ten-minute YouTube videos, which are then condensed into fifteen-second TikTok videos.
Such a desire for entertainment and instant gratification has led them down a dangerous path where focusing on the present leads to procrastination for tomorrow. But as Monday brings party-goers into Friday night, the painful reality of mounting debt, a high rate of delinquency, and a lack of long-term financial planning will hit Gen Z hard. Their bills will be due in no time.
It is not yet clear whether they will continue on this destructive path. If Generation Z hopes for a successful future, they must seize the opportunity to prioritize financial literacy, responsible spending habits, and long-term planning before it's too late.
Daniel Elmore is a Young Voices contributor and teaches economics at Lenoir-Rhyne University. His political commentary has appeared in the Washington Examiner, DC Journal, and Carolina Journal. Follow him on X (formerly Twitter): @daniel_j_elmore
